Today New Era continues with our coverage of the Harambee Prosperity Plan, which is built on five pillars and consists of sub-pillars to form the frame or structure of a house. These pillars are Effective Governance; Economic Advancement; Social Progression; Infrastructure Development; and International Relations and Cooperation. Today we unpack pillar two of HPP: Economic Advancement: Macro-Economic Stability.
This pillar emphasises the importance of the economy in the fight against poverty and corruption. It states that the most effective way to address poverty is through wealth creation, which in turn is done by growing the economy in a sustainable inclusive manner and through the creation of decent employment opportunities. To achieve this, the plan focuses on four critical success factors or sub-pillars, namely: Macro-Economic Stability, Economic Transformation, Youth Enterprise Development, and Economic Competitiveness.
With regard to Macro-Economic Stability, the plan advocates for fiscal consolidation to safeguard our fiscal sovereignty and to build up buffers for counter cyclical policies during periods of economic downturns of global recessions.
Economic transformation focuses on local value addition through the full implementation of the ‘Growth at Home’ strategy by putting in place a broad-based economic empowerment framework, and fast-tracking land reform. The sub-pillar, Youth Enterprise Development, stimulates an entrepreneurial spirit among the Namibian youth and entrepreneurs at large by addressing constraints, such as access to finance and information.
The plan also targets the establishment of 121 enterprises by the rural youth to create much-needed income opportunities for rural youth. Finally, in line with the Fourth National Development Plan, the Economic Competitiveness sub-pillar sets the bold target of becoming the most competitive economy in Africa by 2020. Namibia will achieve this by addressing a number of constraints in the business environment, including reduction of red tape, simplifying the business registration process and provision of quality skills.
The following strategies and actions will be deployed to ensure macro-economic stability is maintained during the Harambee period:
Expenditure Measures: Stricter cost control measures
Government spends significantly on the procurement of various materials and supplies [stationery, vehicles, travelling and accommodation]. Despite being the dominant procurer, government does not benefit from these economies of scale in the form of discounts. To the contrary, often prices get inflated because it is government that procures. This will stop under Harambee. The Ministry of Finance will pay careful attention to bulk procurement and will be given targets to save. Furthermore, the National Planning Commission (NPC) will enhance the review of costs on capital projects so as to optimise value for money for government.
Civil service reform: The single largest expenditure item of government is the wage bill of the civil service that in 2016/17 will amount to N$25 billion. There are good reasons for the wage bill. However, for stability and sustainability purposes, the time has arrived to look into the matter of containing the wage bill without compromising on service delivery. In this connection, the Office of the Prime Minister already started to look into measures on how to contain the wage bill.
These measures will be evaluated in a consultative manner and refined during the first year of the Harambee period. Those measures deemed feasible will be implemented in subsequent years of the Harambee period. The overall principle will be to stabilise the wage bill of government as a constant ratio of expenditure that is deemed sustainable.
Expenditure prioritisation: Government will continue efforts to better prioritise expenditure. In this regard, priority will be given to expenditure items that will generate economic growth and employment. The Ministry of Finance and the NPC will jointly undertake a study on expenditure efficiency that will feed into the next mid-term review of the budget in October 2016. This review will also include the cost of the provision of critical utilities such as water and electricity with a view to reduce wastage.
Revenue Measures:
Better tax collection: To ensure efficient revenue collection, an independent revenue authority will become operational in the first year of Harambee. This will include a focus on administration efficiency, as well as targeted efforts to address tax evasion in general and transfer pricing specifically.
Broadening of the tax base: Efforts at broadening the tax base will continue to be pursued throughout the Harambee period. Some measures include the introduction of a presumptive tax, and the taxation of gambling activities.
Integrated Tax Administration System [ITAS]: To improve on treasury accounting and financial systems, an integrated tax administration system was developed and will go-live in year two of Harambee. Integrated Financial Management System [IFMS]: The Integrated Financial Management System will be upgraded and maintained for effective treasury operations. Solidarity Wealth Tax: Namibia remains one of the most unequal societies in the world with a very high GINI Coefficient. Government will investigate modalities for the introduction of a Solidarity Wealth Tax, as a wealth redistribution instrument. Revenue will be ring-fenced for developmental programmes. The Solidarity Wealth Tax will be taxed on individuals and corporates earning in excess of a certain threshold to be determined in Year One of Harambee. The tax will have a sunset clause of 2030. Special Tax Advisory Committee: We will establish a Special Tax Advisory Committee that will be comprised of individuals from the public and private sector. The purpose of the advisory committee will be to ensure that tax earmarked for poverty eradication activities through the Solidarity Wealth Tax, as and when it is introduced, will be properly managed and ring-fenced.
Other possible revenue sources
State Lottery: Government will investigate the feasibility of establishing and institutionalising a State lottery with the objective to supplement State revenue streams, for poverty eradication activities.
Structural Reform Measures:
Private sector participation in infrastructure development: Infrastructure development requires various methods of funding, other than through the budget. Government has already approved in principle public private partnership arrangements. To enhance transparency and have clear rules in place, a PPP Bill will be tabled in the National Assembly before December 2016.
State-owned Enterprise Reform: State-owned enterprises (SOE) play a critical role in supporting government’s growth and employment creation objectives, as well as service delivery. Unfortunately, some SOEs have been hampered by governance problems and depend significantly on government financial injections to sustain operations. At the same time, some of these SOEs have significant assets that are not fully leveraged, resulting in such assets becoming dead capital. In this regard, the Ministry of Public Enterprises has been tasked to present proposals before the end of September 2016 on how to better leverage the assets of SOEs to reduce the financial burden on the national budget.
Tomorrow we will unpack Economic Transformation within the Economic Advancement Pillar.